What Is Development Finance?
Development finance is a specialist form of short-term property lending designed to fund the construction, conversion, or heavy refurbishment of residential and commercial property. Unlike conventional mortgages, development finance is structured around the unique cash-flow requirements of a building project, with funds released in stages as construction progresses rather than as a single upfront advance.
In Fulham, development finance plays a critical role in enabling property developers to acquire sites, fund construction works, and bring new homes and commercial spaces to market. Whether you are converting a period Victorian terrace on Munster Road into luxury apartments, building a contemporary residential scheme in the Sands End regeneration zone, or undertaking a mixed-use development near Fulham Broadway, development finance provides the capital structure needed to turn planning consent into completed property.
The loan is secured against the development site by way of a first legal charge, with interest typically rolled up and repaid at the end of the project when the completed units are sold or refinanced. This means developers do not need to make monthly interest payments during the construction phase, preserving cash flow for the build programme itself.
As specialist development finance brokers with deep knowledge of the Fulham property market, we work with over 100 lenders to secure the most competitive terms for your project. Our understanding of local property values, planning dynamics within the London Borough of Hammersmith and Fulham, and the specific challenges of developing in SW6 allows us to present your scheme in the strongest possible light to prospective lenders.
Types of Development Finance
Development finance encompasses several distinct funding structures, each serving a different purpose in the capital stack. Understanding which type suits your Fulham project is essential to optimising your funding structure and maximising returns.
Senior Debt
The primary layer of development finance, secured as a first charge against the development site and works. Senior debt typically covers 60-70% of total project costs and is the most cost-effective form of development funding available to Fulham developers.
- First charge security
- Up to 70% LTC
- Lowest interest rates
- Staged drawdowns against QS certification
Stretched Senior
A single-facility solution that combines senior debt and mezzanine into one loan, typically offering up to 80% of total project costs. This streamlined structure avoids the complexity of managing two separate lenders and intercreditor agreements.
- Up to 80% LTC in one facility
- Single lender relationship
- No intercreditor agreement needed
- Simplified legal process
Mezzanine Finance
A second-charge loan layered on top of senior debt to increase overall leverage to 85-90% of total costs. Mezzanine finance reduces the equity a developer needs to contribute, freeing capital for additional projects across Fulham.
- Combined LTC up to 90%
- Second charge behind senior lender
- Reduces equity requirement
- Intercreditor agreement required
Development Equity
Equity investment from JV partners or institutional investors that sits alongside debt to fund up to 100% of total project costs. Ideal for Fulham developers seeking to scale their portfolio without tying up personal capital.
- Up to 100% of project costs
- Profit share from 20%
- Joint venture structures
- No monthly interest payments
How Development Finance Works
From initial enquiry to final drawdown, our five-step process is designed to secure the best possible funding for your Fulham development project.
Application & Appraisal
Submit your development appraisal, planning documents, and project details. Our team reviews your scheme within 24 hours and presents it to the most suitable lenders from our panel of over 100 specialists. We prepare a comprehensive funding proposal that highlights the strengths of your Fulham project.
Valuation & Due Diligence
The lender instructs an independent RICS valuation of the site and a review of your development appraisal. For Fulham projects, valuers with local SW6 market knowledge are essential to accurately assess residual land value and projected GDV. We manage the entire valuation process on your behalf.
Legal & Drawdown
Once credit-approved, solicitors prepare the facility agreement and security documents. The initial tranche is drawn down to complete the site acquisition. For Fulham projects, this first drawdown typically covers the land purchase price and arrangement fees, allowing you to take ownership and begin works.
QS Monitoring & Tranches
As construction progresses, an independent Quantity Surveyor inspects the works at agreed milestones. Once each stage is certified as complete, the next tranche of funding is released. This staged drawdown process ensures the project stays on track and protects both the developer and lender.
Completion & Exit
Upon practical completion, the exit strategy is executed, whether that is selling the completed units on the open market, refinancing onto a term mortgage, or retaining the properties within a rental portfolio. The development loan is repaid in full, including rolled-up interest and any exit fees.
Key Development Finance Parameters
Understanding the key metrics and parameters that lenders use to assess your development finance application will help you structure the strongest possible proposal for your Fulham project.
Loan-to-Cost (LTC)
Maximum percentage of total development costs that the lender will fund, including land acquisition, construction, professional fees, and contingency. Higher LTC ratios are available for experienced developers with strong track records in the Fulham market.
Gross Development Value
The loan amount expressed as a percentage of the completed development value. Fulham's strong property values, with average prices exceeding three quarters of a million pounds, mean that GDV constraints are rarely the binding factor on scheme viability.
Interest Rates
Monthly interest rates for development finance in Fulham. Rates are typically rolled up (added to the loan) rather than serviced monthly, so no monthly payments are required during the build period. The total cost of finance is repaid at project completion.
Loan Terms
Flexible terms to match your development programme. Shorter terms suit refurbishment projects, while ground-up new builds in Fulham typically require 18-24 months. Extensions are usually available if the project requires additional time.
Arrangement Fees
One-off fee charged by the lender at the outset of the facility, calculated as a percentage of the gross loan amount. Lower fees are available for larger schemes and experienced developers. This fee can usually be added to the loan facility.
Minimum Loan Size
Development finance is available from as little as two hundred and fifty thousand pounds for smaller refurbishment schemes in Fulham, up to ten million pounds or more for larger ground-up developments and multi-unit residential projects.
What We Fund in Fulham
From boutique residential conversions to large-scale new build apartments, we arrange development finance for the full spectrum of property projects across Fulham and the SW6 postcode area.
New Build Residential
Ground-up construction of houses and apartment schemes on brownfield and infill sites across Fulham. From boutique developments of 2-4 units to larger schemes of 20 or more apartments in areas like Sands End and Imperial Wharf.
Conversion Projects
Converting existing buildings into residential units, a particularly common development type in Fulham where large Victorian and Edwardian properties lend themselves to subdivision into high-quality flats.
Heavy Refurbishment
Substantial renovation projects that involve structural alterations, extensions, or significant reconfiguration of existing properties. Fulham's period housing stock offers abundant opportunities for value-adding refurbishment.
Mixed-Use Schemes
Developments combining commercial ground-floor space with residential units above, commonly found along Fulham Road, North End Road, and Fulham Broadway where the planning framework supports vibrant mixed-use neighbourhoods.
Commercial Development
Purpose-built commercial properties including office space, retail units, and light industrial facilities. While less common in Fulham than residential schemes, commercial development finance is available for viable projects with strong pre-lets.
The Development Finance Capital Stack
The capital stack describes how a development project is funded through different layers of finance, each carrying different risk profiles, costs, and security positions. Understanding the capital stack is fundamental to structuring the optimal funding solution for your Fulham development.
At the base of the stack sits senior debt, the lowest-cost and most senior form of lending, secured by a first charge over the development site. Above this, mezzanine finance provides additional leverage at a higher cost, secured by a second charge. At the top sits the developer's equity contribution, representing the highest risk but also commanding the greatest share of profits.
For a typical Fulham development with total costs of two million pounds, the capital stack might comprise one million four hundred thousand pounds of senior debt at 70% LTC, four hundred thousand pounds of mezzanine at 20%, and two hundred thousand pounds of developer equity at 10%. This blended structure allows developers to maximise their return on equity while maintaining manageable financing costs.
Example Capital Stack: £2M Development
Development Finance vs Bridging vs Mezzanine
Choosing the right finance product is critical to your project's success. Here is how development finance compares to bridging loans and mezzanine finance for Fulham property projects.
| Feature | Development Finance | Bridging Finance | Mezzanine Finance |
|---|---|---|---|
| Purpose | Fund ground-up builds, conversions & major refurbs | Short-term property acquisition or chain break | Top-up leverage above senior debt |
| Typical LTC / LTV | Up to 70% LTC | Up to 75% LTV | Combined up to 90% LTC |
| Interest Rates | From 0.65% pm | From 0.55% pm | From 1.0% pm |
| Loan Term | 6 - 36 months | 1 - 24 months | 6 - 24 months |
| Drawdown | Staged against QS certification | Single drawdown at completion | Aligned to senior drawdown schedule |
| Security | First charge on development site | First charge on property | Second charge behind senior lender |
| Interest Type | Rolled up (no monthly payments) | Rolled up or serviced monthly | Rolled up |
| Exit Strategy | Sale of completed units or refinance | Sale, refinance, or development finance | Repaid alongside senior debt exit |
| Planning Required | Yes, typically full or outline | Not required | Yes, aligned with senior requirements |
| Best For | Developers building or converting property | Quick acquisitions and short-term needs | Reducing equity requirement on developments |
Eligibility & Requirements
While every application is assessed on its merits, understanding the key eligibility criteria will help you prepare a strong application for development finance in Fulham.
Developer Experience
Lenders assess your track record in delivering similar projects. First-time developers can still access funding, though terms may be more conservative. Having a strong professional team, including an experienced contractor, architect, and project manager, significantly strengthens your application. Many Fulham developers start with smaller refurbishment projects to build their credentials before progressing to larger schemes.
- Demonstrate relevant project experience
- Engage experienced professionals
- Start with smaller schemes if new to development
Planning Permission
Most development finance lenders require planning permission to be in place before making a formal offer. In Fulham, this means working within the London Borough of Hammersmith and Fulham's local plan and understanding conservation area constraints, Article 4 directions, and the specific policies that apply to your site. Projects with full planning consent achieve the best terms, while those with outline permission or subject to conditions may face limitations.
- Secure full planning before applying
- Understand LBHF planning policies
- Check conservation area status early
Minimum Scheme Size
Development finance is typically available for projects with a total development cost of two hundred and fifty thousand pounds or more. For Fulham, where land and construction costs are elevated compared to outer London boroughs, most viable development schemes comfortably exceed this threshold. Lenders also consider the gross development value and the projected profit margin, typically requiring a minimum profit on cost of 15-20%.
- Minimum total cost typically from 250K
- GDV must support a viable profit margin
- Profit on cost of 15-20% expected
Site & Security
The development site itself serves as security for the loan. Lenders will assess the site's suitability, any environmental or ground condition concerns, access arrangements, and the overall viability of the proposed scheme. In Fulham, factors such as flood risk along the Thames corridor, party wall matters with adjoining owners, and any restrictive covenants will be examined during the due diligence process.
- Clean title and vacant possession preferred
- Environmental and flood assessments may be needed
- Party wall agreements for terraced sites
Why Fulham for Property Development?
Fulham occupies one of the most sought-after positions in London's residential market, situated between Chelsea to the east and Putney to the west, with the Thames forming its southern boundary. This prime location, combined with excellent transport links via the District line, Overground, and multiple bus routes, creates sustained demand from buyers and renters alike.
Property values in Fulham range from around seven hundred thousand pounds for a standard flat to well over two million pounds for larger family homes in premium areas like Hurlingham and Parsons Green. This creates an attractive GDV environment for developers, with strong end values supporting viable development appraisals across a range of project types.
The borough's diverse building stock, from grand Victorian terraces and mansion blocks to modern riverside developments, offers development opportunities at every price point. The ongoing regeneration of areas like Sands End and the ripple effect from neighbouring Chelsea and Earl's Court provide additional momentum to Fulham's property market.
Example Fulham Development Finance Scenarios
Illustrative examples of the type of development finance facilities we structure for property developers working in Fulham and the surrounding SW6 area. These are illustrative scenarios, not completed transactions.
Victorian Terrace Conversion, Parsons Green
Conversion of a large Victorian terrace into four luxury apartments in the heart of Parsons Green. The project included a full basement dig, rear extension, and comprehensive interior renovation to create premium SW6 living spaces.
Tight conservation area constraints required sympathetic external design while maximising internal space.
We secured development finance with a lender experienced in conservation area projects, allowing the developer to proceed with confidence.
New Build Apartments, Sands End
Ground-up construction of a boutique development of 8 contemporary apartments on a former commercial site in the Sands End regeneration area.
First-time developer required guidance through the entire finance process alongside competitive terms.
Structured a development finance facility with staged drawdowns and QS monitoring, providing the developer with a clear funding roadmap.
Mixed-Use Scheme, Fulham Broadway
Comprehensive redevelopment of a commercial property near Fulham Broadway into ground-floor retail with six residential apartments above.
Complex planning conditions and the need to maintain commercial frontage while creating quality residential units.
Sourced a specialist lender comfortable with mixed-use schemes in prime high street locations, achieving 68% LTC.
Development Finance FAQs
Detailed answers to the most common questions about development finance for property projects in Fulham.